Privatization and water/environmental degradation in England

In the US, a number of water agencies have been privatized over the past couple decades, as local governments, strapped for cash, can't afford the increased costs of environmental protection and new regulations.  Privatization usually comes with significantly increased rates ("Towns sell their public water systems — and come to regret it," Washington Post; "Privatizing Our Public Water Supply," American Prospect).

One of the fears of President Biden's push for infrastructure spending is that it will be associated with privatization ("Wall Street Sees Big Wish Granted in Biden’s Infrastructure Deal," Bloomberg).

British papers reported on a recent fine of a private water firm in England, where rather than investing in improvements in sewage treatment, they just released sewage into the waters ("‘The sea was milky white’: how the Southern Water sewage scandal unfolded," Guardian).  In the process, this destroyed the East Coast shellfish industry.

It's a £90 million fine, but not likely to make much difference ("Why are England’s water companies pumping out a tide of sewage? Because they can," Guardian).  

Two other elements that created the "playing field" where noncompliance is supported:

1.  the UK Environment Agency has had its budget cut by about 2/3 -- not unlike the Trump's Administration destruction of the EPA ("The Trump Administration Is Reversing Nearly 100 Environmental Rules. Here’s the Full List.," New York Times) -- and it was minimal to begin with, £120 million.

-- "Cutbacks stopping vital work on river pollution and floods in England," Guardian

2. Rather than investigate sewage discharges, the Conservatives shifted to "self-reporting"  ("Water firms discharged raw sewage into English waters 400,000 times last year," Guardian).

Kind of like Nancy Reagan ("How to use the presidency to get $1 million in free designer clothes, a lesson from Nancy Reagan," Timeline) or Leona Helmsley failing to report gifts or taxes.  

Of course, the treatment facilities under-report.

In the US, it would be possible to sue the companies for additional damages under other laws.  Certainly, the shellfish industry ought to be able to sue Southern Water for how their practices destroyed their industry?  But I guess not.

Rivercide.  Separately, Guardian columnist George Monbiot has produced a live documentary on the impact of privatization on the water quality of England's rivers.  In short, "not good."  ("Livestreamed documentary Rivercide to unmask UK’s water polluters")

Externalities/spillover costs.  The funny thing is that "spillover costs" are one of the first things you learn in introductory economics.  

Costs of production not borne by the firm but passed on to society (e.g. pollution), are known as spillover or external costs, or negative externalities. The government must reallocate resources away from areas where spillover costs exist and toward areas where spillover benefits are large (e.g. health and education).

It's amazing that conservative politicians, in their zeal to make things easy for business, forget that very basic lesson about how businesses are incentivized to push such costs off onto other parties.